Cabinet Office

Meeting of the Withdrawal Agreement Joint Committee

Michael Gove: The Withdrawal Agreement Joint Committee met on 10 September at Lancaster House, London. The meeting was chaired by the Chancellor of the Duchy of Lancaster, Michael Gove, and the European Commission Vice President, Maroš Šefcovic, alongside the alternate co-chairs of the Committee, the Paymaster General, Penny Mordaunt, and Michel Barnier. Representatives from the Northern Ireland Executive and the EU 27 Member States also joined by videolink.The Committee discussed the UK Internal Market Bill and the Northern Ireland Protocol. The UK made clear that the legislative timetable for the Bill would continue as planned and reiterated its commitment to implementing the Withdrawal Agreement, including the Northern Ireland Protocol, and the Decisions of the Joint Committee.The UK Government also stressed its obligations to the people of Northern Ireland, its determination to uphold the constitutional status of Northern Ireland, and its responsibility to provide good governance for the whole United Kingdom. As co-guarantor, along with Ireland, of the Belfast (Good Friday) Agreement, the Government’s commitment to that agreement remains absolute.The UK Government will continue to engage in Joint Committee discussions constructively, with the aim of finding a satisfactory outcome for both sides.

Treasury

Treasury Update

Kemi Badenoch: The UK has left the European Union and entered a transition period. In light of this new relationship the government has reviewed the excise duty and VAT treatment of goods purchased by individuals for their own use and carried across borders in their luggage. The government is today announcing the rules which will apply to goods carried across borders by passengers travelling to and from Great Britain to countries outside of the United Kingdom. These changes will apply from 1 January 2021 when the transition period comes to an end.Currently these reliefs are largely set out in EU legislation, with different rules for those travelling to or from the EU, and those travelling to or from non-EU countries. This will have to be aligned following the transition period so that EU and non-EU passengers are treated equally. At Spring Budget, on 11 March 2020, the government published a consultation on the potential approach to goods carried across borders by passengers. There were a range of views and evidence submitted in response to that consultation and the government has had to balance competing policy objectives, while taking into account the views of stakeholders. A full summary of responses to the consultation has been published alongside this statement.This announcement focuses primarily on the treatment in GB. The government continues to work with the Joint Committee on the implementation of the Northern Ireland Protocol. The government is also committed to providing guidance on how the Northern Ireland Protocol will work, including for duty-free and tax-free goods, ahead of the end of the transition period.The government will make and lay a Statutory Instrument subject to the negative procedure before the House of Commons in due course to give effect to these changes from 1 January 2021. The below summarises the final policy decisions.Duty-free sales and personal allowancesThe government is taking advantage of the opportunity provided by the UK’s new relationship with the EU to enable passengers travelling from GB to the EU to purchase duty-free excise goods once they have passed security controls at airports, ports, and train stations on international routes, on the same basis as currently applies to passengers travelling to non-EU destinations. This means passengers travelling from GB won’t have to pay UK VAT and excise duty on these purchases of alcohol and tobacco products when they travel to an EU destination. They will also be able to purchase duty-free goods on-board planes on international routes, on international train journeys and ships sailing from GB to a destination outside the UK for consumption on-board and to take-away. This is something that many businesses have raised as part of the consultation and the government will implement this as soon as the transition period ends.At the same time, passengers travelling to GB from the EU will no longer be able to bring back unlimited amounts of alcohol, tobacco, or other goods (for example, clothing and electronics) for personal use without making a declaration and paying the relevant taxes. Passengers will instead have the option to bring in defined amounts of alcohol, tobacco and other goods purchased from duty- or tax-free shops, or with tax and duty paid on the high street, in the EU without paying the relevant taxes and duties on entry to GB. These personal allowances currently apply to non-EU countries and the government is now ensuring that EU and non-EU passengers are treated equally. The government is also using its new freedoms to significantly increase the current allowances for alcohol for passengers arriving from both EU and non-EU countries. This will allow a reasonable amount of alcohol to be brought into GB, for example three crates of beer, two cases of still wine and one case of sparkling wine, without the relevant taxes being due. The current levels of allowances will remain for tobacco products and all other goods.Tax-free sales under the airside extra statutory concessionCurrently airside tax-free sales of non-excise goods are permitted under an extra statutory concession for those travelling from the UK to non-EU countries. The government made clear in the consultation that it had a number of concerns over how the benefit is passed on to passengers and that in some instances the relief is not consistent with international tax principles. As such, the government is not extending tax-free sales to passengers travelling to the EU but is instead withdrawing tax-free sales across the UK for all passengers from 1 January 2021.The VAT Retail Export SchemeSimilarly, the VAT Retail Export Scheme will not be extended to EU visitors and will be withdrawn for non-EU visitors in GB from 1 January 2021. This means that overseas visitors will no longer be able to obtain a VAT refund on items they buy in GB and take home with them in their luggage. The VAT Retail Export Scheme is a costly relief which does not benefit the whole of GB equally, with current use of the scheme largely centred in London. Retailers will instead continue to be able to offer VAT-free shopping, consistent with international principles of taxation, to non-EU visitors who purchase items in store and have them delivered direct to their overseas addresses. Following the end of transition period, this will also be available to EU visitors.

Economic Update

Rishi Sunak: Today I can inform the House that I have asked the Office for Budget Responsibility (OBR) to prepare an economic and fiscal forecast to be published in mid to late November.